ThZeal - The Zeal

incref-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________

FORM 10-Q

_______________________________________________


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-56564

Invesco Commercial Real Estate Finance Trust, Inc.

(Exact name of registrant as specified in its charter)

_______________________________________________


Maryland						92-1080856
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

2001 Ross Avenue, Suite 3400 Dallas, Texas						75201
(Address of principal executive offices)						(Zip Code)

(972) 715-7400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 6, 2024, there were 9,599,123 outstanding shares of common stock of Invesco Commercial Real Estate Finance Trust, Inc. comprised of 54,677 Class S common stock, 3,329,157 Class S-1 common stock, 54,677 Class D common stock, 1,265,896 Class I common stock, 147,368 Class E common stock, and 4,747,348 Class F common stock.

Invesco Commercial Real Estate Finance Trust, Inc.

Table of Contents


		Page
PART I FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	1

	Unaudited Condensed Consolidated Statement s of Operations for the three months ended March 31, 2024 and 2023	2

	Unaudited Condensed Consolidated Statement s of Changes in Stockholders’ Equity and Redeemable Common Stock for the three months ended March 31, 202 4 and 2023	3

	Unaudited Condensed Consolidated Statement s of Cash Flows for the three months ended March 31, 2024 and 2023	4

	Notes to Unaudited Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	34

Item 4.	Controls and Procedures	36

PART II OTHER INFORMATION		37

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	37

Item 3.	Defaults Upon Senior Securities	37

Item 4.	Mine Safety Disclosures	37

Item 5.	Other Information	37

Item 6.	Exhibits	38

SIGNATURES

PART I

ITEM 1. FINANCIAL STATEMENTS

Invesco Commercial Real Estate Finance Trust, Inc.

Condensed Consolidated Balance Sheets

Unaudited


$ in thousands except share amounts	March 31, 2024		December 31, 2023
ASSETS
Commercial real estate loan investments, at fair value (including pledged loans of $782,798 and $591,003, respectively)	$	824,333	$	613,503
Cash and cash equivalents	5,960		1,975
Restricted cash	14,021		23,566
Interest receivable	3,191		2,448
Due from affiliates	228		—
Other assets	189		151
Total assets	$	847,922	$	641,643

LIABILITIES
Repurchase agreements, at fair value	$	609,981	$	457,861
Revolving credit facility, at fair value	18,000		14,000
Interest payable	2,207		1,687

Dividends and distributions payable (including $2,273 and $2,363 due to related party, respectively)	4,197		3,138
Accounts payable, accrued expenses and other liabilities	15,268		23,978
Due to affiliates	15,327		10,167
Total liabilities	664,980		510,831

Commitments and contingencies (See Note 11)

Redeemable common stock - related party (see Note 6)	$	105,340	$	105,340

STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value per share, 50,000,000 shares authorized
12.5% Series A Cumulative Redeemable Preferred Stock, 228 shares issued and outstanding ($228 aggregate liquidation preference)	205		205
Common stock, Class S shares, $0.01 par value per share, 500,000,000 shares authorized	—		—
Common stock, Class S-1 shares, $0.01 par value per share, 500,000,000 shares authorized	25		11
Common stock, Class D shares, $0.01 par value per share, 500,000,000 shares authorized	—		—
Common stock, Class I shares, $0.01 par value per share, 500,000,000 shares authorized	10		3
Common stock, Class E shares, $0.01 par value per share, 500,000,000 shares authorized	1		—
Common stock, Class F shares, $0.01 par value per share, 500,000,000 shares authorized	—		—
Additional paid-in capital	86,288		32,549
Accumulated deficit	(8,927)		(7,296)
Total stockholders’ equity	77,602		25,472
Total liabilities, redeemable common stock and stockholders’ equity	$	847,922	$	641,643

The accompanying notes are an integral part of these condensed consolidated financial statements.

Invesco Commercial Real Estate Finance Trust, Inc.

Condensed Consolidated Statements of Operations

Unaudited


	Three Months Ended March 31, 2024		Three Months Ended March 31, 2023

$ in thousands except share and per share amounts
Net Interest Income
Commercial real estate loan interest income	$	15,140	$	—
Other interest income	241		—
Interest expense	(10,406)		—
Net interest income	4,975		—

Other Income (Expense)
Unrealized gain (loss) on commercial real estate loan investments, net	918		—
Unrealized gain (loss) on repurchase agreements, net	(723)		—
Commitment fee income, net of related party expense of $1,398 and $0, respectively	1,398		—
Other income	101		—
Total other income (expense), net	1,694		—

Expenses
Management and performance fees - related party	350		—
Debt issuance costs related to borrowings, at fair value	469		652
Organizational costs	5		450
General and administrative	1,158		25
Total expenses	1,982		1,127

Net income (loss)	4,687		(1,127)
Dividends to preferred stockholders	(7)		—
Net income (loss) attributable to common stockholders	$	4,680	$	(1,127)

Earnings (loss) per share:
Net income (loss) attributable to common stockholders
Basic	$	0.65	$	—
Diluted	$	0.65	$	—
Weighted average number of shares of common stock
Basic	7,183,194		—
Diluted	7,183,777		—

The accompanying notes are an integral part of these condensed consolidated financial statements.

Invesco Commercial Real Estate Finance Trust, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity and Redeemable Common Stock

Unaudited


	Series A Preferred Stock		Class S Common Stock		Class S-1 Common Stock		Class D Common Stock		Class I Common Stock		Class E Common Stock		Class F Common Stock		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Total Stockholders' Equity		Redeemable Common Stock
$ in thousands
Balance as of December 31, 2023	$	205	$	—	$	11	$	—	$	3	$	—	$	—	$	32,549	$	(7,296)	$	25,472	$	105,340
Net income (loss)	—		—		—		—		—		—		—		—		4,687		4,687		—

Proceeds from issuance of common stock, net of offering costs	—		—		14		—		7		1		—		52,949		—		52,971		—

Common stock distribution reinvestment	—		—		—		—		—		—		—		773		—		773		—

Common stock dividends	—		—		—		—		—		—		—		—		(6,311)		(6,311)		—
Preferred stock dividends	—		—		—		—		—		—		—		—		(7)		(7)		—
Amortization of equity based compensation	—		—		—		—		—		—		—		17		—		17		—




Balance as of March 31, 2024	$	205	$	—	$	25	$	—	$	10	$	1	$	—	$	86,288	$	(8,927)	$	77,602	$	105,340


	Series A Preferred Stock		Class S Common Stock		Class S-1 Common Stock		Class D Common Stock		Class I Common Stock		Class E Common Stock		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Total Stockholders' Equity		Redeemable Common Stock
$ in thousands
Balance as of December 31, 2022	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Net income (loss)	—		—		—		—		—		—		—		(1,127)		(1,127)		—
Balance as of March 31, 2023	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	(1,127)	$	(1,127)	$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

Invesco Commercial Real Estate Finance Trust, Inc.

Condensed Consolidated Statements of Cash Flows

Unaudited


	Three Months Ended March 31, 2024		Three Months Ended March 31, 2023
$ in thousands

Cash flows from operating activities:
Net income (loss)	$	4,687	$	(1,127)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Unrealized (gain) loss on commercial real estate loan investments, net	(918)		—
Unrealized (gain) loss on repurchase agreements, net	723		—
Debt issuance costs	469		652
Amortization of equity based compensation	17		—
Change in operating assets and liabilities:
Increase in operating assets	(776)		(75)
Increase in due from affiliates	(228)		—
Increase in operating liabilities	1,355		—
Increase in due to affiliates	3,106		549
Net cash provided by (used in) operating activities	8,435		(1)
Cash flows from investing activities:
Originations and fundings of commercial real estate loans	(209,912)		—
Net cash used in investing activities	(209,912)		—
Cash flows from financing activities:
Proceeds from revolving credit facility	91,000		—
Repayment of revolving credit facility	(87,000)		—
Proceeds from repurchase agreements	151,397		—
Proceeds from issuance of common stock, net of offering costs	31,213		—

Proceeds from subscriptions paid in advance	14,021		—

Cash paid for debt issuance costs	(228)		—
Payments of dividends	(4,486)		—
Net cash provided by financing activities	195,917		—

Net change in cash, cash equivalents and restricted cash	(5,560)		(1)
Cash, cash equivalents and restricted cash, beginning of period	25,541		30
Cash, cash equivalents and restricted cash, end of period	$	19,981	$	29





Supplemental disclosures:
Interest paid	$	9,886	$	—
Non-cash investing and financing activities:
Dividends and distributions declared not paid	$	4,188	—
Common stock distribution reinvestment	$	773	$	—
Deferred offering costs due to affiliate	$	5	$	243
Offering costs due to affiliates	$	1,808	$	—
Debt issuance costs due to affiliate	$	241	$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

Invesco Commercial Real Estate Finance Trust, Inc.

Notes to Condensed Consolidated Financial Statements

1.Organization and Business Purpose

Invesco Commercial Real Estate Finance Trust, Inc. (the “Company” or “we”) is a Maryland corporation incorporated in October 2022. Our primary investment strategy is to originate, acquire and manage a diversified portfolio of loans and debt-like preferred equity interests secured by, or unsecured but related to, commercial real estate. We commenced investing activities in May 2023 and have one operating segment.

We are externally managed by Invesco Advisers, Inc. (the “Adviser”), a registered investment adviser and an indirect, wholly-owned subsidiary of Invesco Ltd. (“Invesco”), an independent global investment management firm.

We intend to qualify to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2023. We operate our business in a manner that permits our exclusion from the definition of an “Investment Company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

We are engaging in a continuous, unlimited private offering of our common stock to “accredited investors” (as defined by Rule 501 under the Securities Act) (the “Continuous Offering”) under exemptions provided by Section 4(a)(2) of the Securities Act and applicable state securities laws.

2.Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

Certain disclosures included in our Annual Report on Form 10-K are not required to be included on an interim basis in our quarterly reports on Form 10-Q. We have condensed or omitted these disclosures. Therefore, this Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023.

Our condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and consolidate the financial statements of the Company and its controlled subsidiaries. All significant intercompany transactions, balances, revenues and expenses are eliminated upon consolidation. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for a fair statement of our financial condition and results of operations for the period presented.

All numbers in these notes, except in the tables herein, are stated in full amounts, unless otherwise indicated.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Examples of estimates may include, but are not limited to, estimates of the fair values of financial instruments and estimated payment periods for certain stockholder servicing fee liabilities. Actual results may differ from those estimates.

Significant Accounting Policies

There have been no changes to our accounting policies included in Note 2 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2023.

3.Commercial Real Estate Loan Investments

The table below summarizes our investments in commercial real estate loans as of March 31, 2024 and December 31, 2023.


$ in thousands
Loan Type	Loan Amount(1)		Principal Balance Outstanding		Fair Value		Weighted Average Interest Rate(2)		Weighted Average Life (years)(3)
March 31, 2024
Senior loans(4)	$	954,506	$	823,415	$	824,333	8.46	%	4.56

Total	$	954,506	$	823,415	$	824,333	8.46	%	4.56
December 31, 2023
Senior loans(4)	$	671,406	$	613,503	$	613,503	8.53	%	4.69

Total	$	671,406	$	613,503	$	613,503	8.53	%	4.69

(1)Loan amount consists of outstanding principal balance plus unfunded loan commitments.

(2)Represents weighted average interest rate of the most recent interest period in effect for each loan as of period end. Loans earn interest at the one-month Term Secured Overnight Financing Rate (“SOFR”) plus a spread.

(3)Assumes all extension options are exercised by the borrower; however, loans may be repaid prior to such date. Extension options are subject to certain conditions as defined in the respective loan agreement.

(4)Senior loans include senior mortgages and similar credit quality loans, including related contiguous subordinate loans and accommodation mezzanine loans in connection with the senior mortgage financing.

The tables below detail the property type and geographic distribution of the properties securing our commercial real estate loans as of March 31, 2024 and December 31, 2023.


$ in thousands	March 31, 2024				December 31, 2023
Property Type	Fair Value		Percentage		Fair Value		Percentage
Multifamily	$	552,209	67.0	%	$	346,760	56.5	%
Industrial	272,124		33.0	%	266,743		43.5	%
Total	$	824,333	100.0	%	$	613,503	100.0	%


$ in thousands	March 31, 2024				December 31, 2023
Geographic Location(1)	Fair Value		Percentage		Fair Value		Percentage
West	$	410,009	49.8	%	$	311,852	50.8	%
South	237,633		28.8	%	173,991		28.4	%
East	176,691		21.4	%	127,660		20.8	%
Total	$	824,333	100.0	%	$	613,503	100.0	%

(1) All of the properties securing our commercial real estate loans are located within the United States.

The weighted average loan-to-value ratio, a metric utilized in the fair value measurement of our commercial real estate loan investments, for our 14 loan investments was approximately 65% based on the independent property appraisals at the time of origination.

4.Borrowings

The table below summarizes our repurchase agreement and revolving line of credit borrowings as of March 31, 2024 and December 31, 2023.


		March 31, 2024					December 31, 2023
$ in thousands	Maturity Date	Weighted Average Interest rate(1)	Maximum Facility Size		Amount Outstanding		Fair Value		Amount Outstanding		Fair Value
Repurchase Agreements:
Morgan Stanley Bank N.A.(2)	5/25/25	7.64%	$	500,000	$	282,023	$	282,347	$	174,209	$	174,209
Citibank N.A.(3)	6/1/2025 (original); 6/1/2027 (fully extended)	7.60%	200,000		61,464		61,519		61,464		61,464
Bank of Montreal(4)	7/18/2025 (original); 7/14/2028 (fully extended)	7.41%	279,424		265,771		266,115		222,188		222,188
Total Repurchase Agreements		7.54%	979,424		609,258		609,981		457,861		457,861
Revolving Credit Facility(5)		8.26%	100,000		18,000		18,000		14,000		14,000
Total		7.56%	$	1,079,424	$	627,258	$	627,981	$	471,861	$	471,861

(1) Represents weighted average interest rate of the most recent interest period in effect for each borrowing as of period end. Borrowings under our repurchase agreements and revolving credit facility carry interest at one-month Term SOFR plus a spread.

(2) Borrowing facility has an extension option of one year, subject to lender approval and compliance with certain financial and administrative covenants.

(3) Borrowing facility reflects maximum maturity of two remaining extension options of one year each because these extensions are at our option. The extensions, consistent with our current borrowing terms, are subject to ongoing compliance with certain financial and administrative covenants as well as payment of applicable extension fees.

(4) Borrowing facility has three extension options of one year, subject to lender approval and compliance with certain financial and administrative covenants.

(5) The final maturity date of the Revolving Credit Facility is aligned with the Company’s ability to call remaining outstanding capital under certain subscription agreements, as further explained below.

The following table shows the aggregate amount of maturities of our outstanding borrowings over the next five years and thereafter as of March 31, 2024:


Year	Repurchase Agreements(1)		Revolving Credit Facility		Total
$ in thousands
2024 (remaining)	$	—	$	18,000	$	18,000
2025	609,258		—		609,258
2026	—		—		—
2027	—		—		—
2028	—		—		—
2029	—		—		—
Thereafter	—		—		—
Total	$	609,258	$	18,000	$	627,258

(1) Assumes no extension options are exercised; however, borrowing facilities may be extended at our option subject to lender approval, as applicable.

Repurchase Agreements

We have pledged our commercial real estate loan investments with a fair value of approximately $782.8 million as collateral for our repurchase agreements. We segregate the commercial real estate loans that we have pledged as collateral in our books and records. Our repurchase agreement counterparties have the right to resell or repledge the collateral posted but have the obligation to return the pledged collateral upon maturity of the repurchase agreement.

We may be required to post margin under our repurchase agreements if there is a material adverse change in the credit characteristics of a particular loan with respect to the underlying property, borrower, or particular real estate market. We were not required to post any margin under our repurchase agreements as of March 31, 2024. A margin deficiency may generally result from either a decline in the underlying loan’s market value or a shortfall in operating performance of the property. Our repurchase agreement counterparties generally retain the right to determine the fair value of the underlying collateral in their sole discretion. Subject to applicable thresholds, we would generally be required to post cash as collateral. We may finance multiple commercial loan investments under a repurchase agreement; therefore, a margin excess in one asset could help mitigate a margin deficiency in another asset under the same repurchase agreement. We intend to maintain a level of liquidity that will enable us to meet margin calls.

Our repurchase agreements are subject to certain liquidity, tangible net worth and leverage covenants. We were in compliance with these covenants as of March 31, 2024.

Revolving Credit Facility

Our revolving credit facility is secured by uncalled capital subscriptions under the terms of the Invesco Subscription Agreement and the Class F Subscription Agreement. See Note 6 - “Redeemable Common Stock - Related Party” and Note 7 - “Stockholders’ Equity”, respectively, where each is more fully described. Borrowings under the facility bear interest at one-month Term SOFR or the prime rate plus a spread. The revolving credit facility allows for the ability to obtain tranches of term financing in addition to general borrowings under an Uncommitted Tranche (as defined in the credit agreement). At March 31, 2024, the amount outstanding under the facility was drawn from the Uncommitted Tranche. The Uncommitted Tranche is due on demand (15 business days after notice); any Funded Tranche (as defined in the credit agreement) is due no later than (a) three years from issuance or (b) 360 days after notice; and all amounts outstanding under the facility are due 30 days prior to the last date on which capital calls may be issued. As of March 31, 2024, we had an available balance of $82.0 million under the facility. The facility is prepayable without penalty.

Our revolving credit facility is subject to certain affirmative and negative covenants including a limitation on indebtedness. We were in compliance with these covenants as of March 31, 2024.

5.Accounts payable, accrued expenses and other liabilities

The following table details the components of accounts payable, accrued expenses and other liabilities as of March 31, 2024 and December 31, 2023.


$ in thousands	March 31, 2024		December 31, 2023
Accounts payable and accrued expenses	$	13	$	14
Subscriptions paid in advance (1)	14,021		23,566
Other liabilities	1,234		398
Total	$	15,268	$	23,978

(1) Represents subscriptions received by our transfer agent prior to the date the subscriptions are effective.

6.Redeemable Common Stock - Related Party

Invesco Realty, Inc. (“Invesco Realty”), an affiliate of Invesco, has committed to purchase up to $300.0 million in shares of our common stock. We may call $150.0 million in capital under a subscription agreement (the “Invesco Subscription Agreement”) in one or more closings through March 23, 2028. We may also call up to $150.0 million in additional capital if needed to avoid triggering any concentration limit imposed by a third party in connection with its distribution or placement of our shares. Invesco Realty may not submit its shares for repurchase under the share repurchase plan described in Note 10 - “Related Party Transactions” until the earlier of March 23, 2028 and the date that our aggregate NAV is at least $1.5 billion. We can only accept a repurchase request from Invesco Realty after all requests from unaffiliated stockholders have been fulfilled. We may elect to repurchase all or any portion of the shares acquired by Invesco Realty at any time at a per share price equal to the most recently determined NAV per share for each class (or another transaction price we believe reflects the NAV per share more

appropriately than the prior month’s NAV per share). The Adviser or its affiliate must continue to hold at least $200,000 in shares for so long as Invesco or any affiliate thereof serves as our external adviser.

The following tables summarize the changes in our outstanding shares of redeemable common stock for the three months ended March 31, 2024:


$ in thousands	Class S Redeemable Common Stock		Class D Redeemable Common Stock		Class I Redeemable Common Stock		Class E Redeemable Common Stock		Total Redeemable Common Stock
Balance as of December 31, 2023	$	26,335	$	26,335	$	26,335	$	26,335	$	105,340

Proceeds from issuance of redeemable common stock	—		—		—		—		—
Adjustment to carrying value of redeemable common stock	—		—		—		—		—
Balance as of March 31, 2024	$	26,335	$	26,335	$	26,335	$	26,335	$	105,340


	Class S Redeemable Common Shares	Class D Redeemable Common Shares	Class I Redeemable Common Shares	Class E Redeemable Common Shares	Total Redeemable Common Shares

Balance as of December 31, 2023	1,052,487	1,052,487	1,052,487	1,052,464	4,209,925
Issuance of redeemable common stock	—	—	—	—	—
Balance as of March 31, 2024	1,052,487	1,052,487	1,052,487	1,052,464	4,209,925

7.Stockholders’ Equity

Stapled Unit Offerings of Preferred and Common Stock

As of March 31, 2024 and December 31, 2023, 111 Stapled Units and 117 New Stapled Units were issued and outstanding. Each Stapled Unit consists of one share of 12.5% Series A Cumulative Redeemable Preferred Stock (the “Series A Preferred Stock”), one Class S share, one Class D share and one Class I share. Each New Stapled Unit consists of one share of Series A Preferred Stock and one Class S-1 share. The Stapled Unit and New Stapled Unit holders cannot separate the individual shares of stock that constitute the Stapled Unit and New Stapled Units and can only sell or transfer the Stapled Unit and New Stapled Units as a unit. Holders of Stapled Units and New Stapled Units are not eligible to participate in the share repurchase plan discussed below.

The Series A Preferred Stock has a liquidation value of $1,000 per share. Holders of our Series A Preferred Stock are entitled to receive dividends at an annual rate of 12.5% of the liquidation preference, or $125.00 per share per annum. Dividends are cumulative and payable annually. We can call the Series A Preferred Stock at any time through December 31, 2024 at a 5% redemption premium above the liquidation value. The Series A Preferred Stock has no redemption premium on or after January 1, 2025, and we can call the Series A Preferred Stock for $1,000 per share at any time on or after January 1, 2025. We can call the common shares issued in these offerings at any time at the current transaction price for the respective class of common stock. Each class of common shares is separately redeemable from the Series A Preferred Stock and each other class of common shares. If we elect to redeem any class of common shares included in the Stapled Unit or New Stapled Unit, we will redeem all common shares of that class included in the Stapled Units or New Stapled Units, as applicable.

Common Stock

The table below summarizes the changes in our outstanding shares of common stock for the three months ended March 31, 2024. There were no Class F shares issued or outstanding as of March 31, 2023.


	Three Months Ended March 31, 2024
	Class S Shares	Class S-1 Shares	Class D Shares	Class I Shares	Class E Shares	Total
Total Outstanding Shares as of December 31, 2023	1,052,598	1,054,174	1,052,598	1,383,506	1,067,805	5,610,681
Issuance of common shares to unaffiliated stockholders	—	1,467,311	—	656,221	57,994	2,181,526

Common stock distribution reinvestment	—	21,860	—	8,245	622	30,727
Total Outstanding Shares as of March 31, 2024	1,052,598	2,543,345	1,052,598	2,047,972	1,126,421	7,822,934

In December 2023, we entered into a subscription agreement (the “Class F Subscription Agreement”) with an institutional investor to purchase up to $200 million of Class F shares. The initial purchase price for Class F shares will be the prior month’s NAV per share of Class E shares. For a discussion of fees paid to the Adviser with respect to Class F shares, see Note 10 - “Related Party Transactions - Management Fee and Performance Fee”.

Distributions

For the three months ended March 31, 2024, we declared distributions of $6.3 million. We accrued $4.2 million for distributions payable, of which $2.3 million was accrued for distributions payable to related parties, in our condensed consolidated balance sheets as of March 31, 2024. We did not declare any Class F distributions during the three months ended March 31, 2023.

The table below details the aggregate distributions declared per share for each applicable class of stock for the three months ended March 31, 2024.


	Class S Shares		Class S-1 Shares		Class D Shares		Class I Shares		Class E Shares
Aggregate distribution declared per share	$	0.8600	$	0.8600	$	0.8600	$	0.8600	$	0.8600
Stockholder servicing fee per share	—		(0.0534)		—		—		—
Net distribution declared per share	$	0.8600	$	0.8066	$	0.8600	$	0.8600	$	0.8600

Share Repurchase Plan

We have adopted a share repurchase plan for our common stock. On a monthly basis, our stockholders may request that we repurchase all or any portion of their shares. We may choose, in our discretion, to repurchase all, some or none of the shares that have been requested to be repurchased at the end of any month, subject to the limitations in the share repurchase plan.

Under its subscription agreement, the Class F stockholder may not participate in our share repurchase plan until the earlier of (i) the date our NAV reaches $1.5 billion and (ii) March 23, 2028. However, the Class F stockholder is entitled to request that we repurchase their shares in the event that there is a key person event or a material strategy change as defined in the terms of the Class F subscription agreement.

We did not receive any stockholder repurchase requests in the three months ended March 31, 2024.

Distribution Reinvestment Plan

We have adopted a distribution reinvestment plan whereby stockholders will have their cash distributions automatically reinvested in additional shares of common stock unless they elect to receive their distributions in cash. The per share purchase price for shares purchased under the distribution reinvestment plan is equal to the transaction price at the time the distribution is payable.

8.Earnings per Common Share

Earnings per share for the three months ended March 31, 2024 is computed as presented in the table below. We did not present a calculation for earnings per share for the three months ended March 31, 2023 because we did not issue any common stock until May 2023.

For the Three Months Ended

$ in thousands, except per share amount

March 31, 2024

Numerator (Income)

Basic Earnings:

Net income (loss) available to common stockholders

4,680

Denominator (Weighted Average Shares)

Basic Earnings:

Shares available to common stockholders

7,183,194

Effect of dilutive securities:

Restricted stock awards

583

Dilutive Shares

7,183,777

Earnings (loss) per share:

Net income (loss) attributable to common stockholders

Basic

0.65

Diluted

0.65

9.Fair Value of Financial Instruments

A three-level valuation hierarchy exists for disclosure of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. The three levels are defined as follows:

Level 1 — quoted prices are available in active markets for identical investments as of the measurement date. We do not adjust the quoted price for these investments.

Level 2 — quoted prices are available in markets that are not active or model inputs are based on inputs that are either directly or indirectly observable as of the measurement date.

Level 3 — pricing inputs are unobservable and include instances where there is minimal, if any, market activity for the investment. These inputs require significant judgment or estimation by management or third parties when determining fair value and generally represent anything that does not meet the criteria of Levels 1 and 2. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed.

Valuation of Financial Instruments Measured at Fair Value

The following table details our financial instruments measured at fair value on a recurring basis:


	March 31, 2024
	Fair Value Measurements Using:
$ in thousands	Level 1		Level 2		Level 3		Total at Fair Value
Assets:
Commercial real estate loan investments	$	—	$	—	$	824,333	$	824,333

Liabilities:
Revolving credit facility	—		—		18,000		18,000
Repurchase agreements	—		—		609,981		609,981
Total liabilities	$	—	$	—	$	627,981	$	627,981


	December 31, 2023
	Fair Value Measurements Using:
$ in thousands	Level 1		Level 2		Level 3		Total at Fair Value
Assets:
Commercial real estate loan investments	$	—	$	—	$	613,503	$	613,503

Liabilities:
Revolving credit facility	—		—		14,000		14,000
Repurchase agreements	—		—		457,861		457,861
Total liabilities	$	—	$	—	$	471,861	$	471,861

Valuation of Commercial Real Estate Loan Investments

Our commercial real estate loan investments consist of senior mortgages and similar credit quality loans, including related contiguous subordinate loans, and are classified as Level 3. The commercial loans are carried at fair value based on significant unobservable inputs. The following table shows a reconciliation of the beginning and ending fair value measurements of our commercial real estate loan investments:


$ in thousands	Three Months Ended March 31, 2024
Beginning Balance	$	613,503
Loan originations and fundings	209,912
Net unrealized gain (loss)	918
Ending Balance at March 31, 2024	$	824,333

The following table summarizes the significant unobservable inputs used in the fair value measurement of our investments in commercial loans:

Type

Valuation Technique

Unobservable Input

Weighted Average Rate

Range

Weighted Average Life (years)(1)

Commercial loans

Discounted cash flow

Discount rate

8.28%

7.92% - 8.47%

0.85

(1) Based on expected cash flows and potential prepayments.

The discount rate above is subject to change based on changes in economic and market conditions, in addition to changes in the underlying economics of the arrangement, such as changes in the underlying property valuation and debt service. These rates are also based on the location, type and nature of each underlying property and related industry publications. Changes in discount rates result in increases or decreases in the fair values of these investments. The discount rate encompasses, among other things, uncertainties in the valuation models with respect to the amount and timing of cash flows. It is not possible for us to predict the effect of future economic or market conditions based on our estimated fair values.

Valuation of Revolving Credit Facility

Given the uncertainty of future cash flows, including our ability to prepay without penalty, we determined the fair value of our revolving credit facility to approximate par.

The following table shows a reconciliation of the beginning and ending fair value measurements of our revolving credit facility:


$ in thousands	Three Months Ended March 31, 2024
Beginning Balance	$	14,000
Proceeds from revolving credit facility	91,000
Repayment of revolving credit facility	(87,000)
Net unrealized (gain) loss	—
Ending Balance at March 31, 2024	$	18,000

Valuation of Repurchase Agreements

We have entered into repurchase agreement facilities to provide floating rate financing for our commercial real estate loan investments. Our repurchase agreements are carried at fair value based on significant unobservable inputs and are classified as Level 3. The following table shows a reconciliation of the beginning and ending fair value measurements of our repurchase agreements:


$ in thousands	Three Months Ended March 31, 2024
Beginning Balance	$	457,861
Borrowings under repurchase agreements	151,397

Net unrealized (gain) loss	723
Ending Balance at March 31, 2024	$	609,981

The following table summarizes the significant unobservable inputs used in the fair value measurement of our repurchase agreements:

Type

Valuation Technique

Unobservable Input

Weighted Average Rate

Range

Weighted Average Life (years)(1)

Repurchase agreements

Discounted cash flow

Discount rate

7.35%

7.07% - 7.62%

0.80

(1) Based on expected cash flows and potential prepayments.

The discount rate above is subject to change based on changes in economic and market conditions, in addition to changes in the underlying economics of the pledged commercial real estate loan, such as changes in the loan-to-value ratio, credit profile and debt service. These rates are also based on the location, type and nature of each pledged property underlying the commercial real estate loan and related industry publications. Changes in discount rates result in increases or decreases in the fair values of these investments. The discount rate encompasses, among other things, uncertainties in the valuation models with respect to the amount and timing of cash flows. It is not possible for us to predict the effect of future economic or market conditions based on our estimated fair values.

10.Related Party Transactions

Due to/from Affiliates

Our due from affiliates balance consists of amounts paid by the Company that are due to us from the Adviser under the terms of our advisory agreement and totaled $228,000 as of March 31, 2024. (December 31, 2023: None).

The following table details the components of due to affiliates as of March 31, 2024 and December 31, 2023.


$ in thousands	March 31, 2024		December 31, 2023
Adviser commitment fee payable	$	1,510	$	113
Advanced organizational costs	713		707
Advanced offering costs	1,281		1,293
Advanced debt issuance costs	4,196		3,727
Advanced general and administrative expenses(1)	4,117		2,993
Accrued stockholder servicing fees	3,160		1,334
Accrued management fee	145		—
Accrued performance fee	205		—
Total	$	15,327	$	10,167

(1) Advanced general and administrative expenses as of March 31, 2024 and December 31, 2023 includes approximately $106,000 and $73,000, respectively, of prepaid expenses which are included in other assets on our condensed consolidated balance sheets.

Adviser Commitment Fee

We charge a commitment fee to borrowers in connection with the origination of each new loan. The commitment fee is calculated as a percentage of the whole loan at the time of the loan closing. We pay the Adviser 50% of the commitment fee (not to exceed 0.5% of the loan amount) as compensation for sourcing, structuring and negotiating the loan. The commitment fee income and related expense to the Adviser is reported as commitment fee income, net of related party expense on the condensed consolidated statements of operations.

Organizational Costs and Offering Expenses

Under the terms of our amended and restated advisory agreement dated April 24, 2024, the Adviser has agreed to advance all of our organizational costs and offering expenses (other than upfront selling commissions and ongoing stockholder servicing fees) incurred through May 31, 2024. We will reimburse the Adviser for all of our organizational costs and offering expenses advanced through May 31, 2024 ratably over 52 months commencing December 1, 2024.

Under the terms of our advisory agreement, organizational costs and offering expenses became a liability of the Company on March 23, 2023. Organizational costs and offering expenses include costs incurred by the Adviser prior to entering into the advisory agreement with the Company.

Operating Expenses Reimbursement

Under the terms of our amended and restated advisory agreement dated April 24, 2024, the Adviser has agreed to advance our operating expenses, including debt issuance costs and general and administrative expenses, incurred through May 31, 2024. We will reimburse the Adviser for all of our operating expenses advanced through May 31, 2024 ratably over 52 months commencing December 1, 2024.

Following May 31, 2024, we will reimburse the Adviser at the end of each fiscal quarter for total operating expenses paid by the Adviser. However, we may not reimburse the Adviser at the end of any fiscal quarter for total operating expenses (as defined in our charter) that, in the four consecutive fiscal quarters then ended, exceed the greater of 2% of average invested assets or 25% of net income determined without reduction for any non-cash reserves and excluding any gain from the sale of our assets for that period (the “2%/25% Guidelines”). We may reimburse the Adviser for expenses in excess of the 2%/25% Guidelines if a majority of our independent directors determines that such excess expenses are justified based on unusual and non-recurring factors.

Stockholder Servicing Fees and Other Selling Commissions

The Dealer Manager is entitled to receive upfront selling commissions and stockholder servicing fees for Class S, Class S-1 and Class D shares sold in the Continuous Offering. The Dealer Manager reallows (pays) all or a portion of the stockholder servicing fees to participating broker-dealers and servicing broker-dealers for ongoing stockholder services performed by such broker-dealers and will waive stockholder servicing fees to the extent a broker-dealer is not eligible to receive it for failure to provide such service.

We accrue the full amount of stockholder servicing fees payable as an offering cost at the time each Class S-1 share is sold during the Continuous Offering. During the three months ended March 31, 2024, we paid approximately $86,000 of stockholder servicing fees with respect to the outstanding Class S-1 shares and did not incur stockholder servicing fees with respect to the outstanding Class S and Class D shares. During the year ended December 31, 2023, we paid approximately $15,000 of stockholder servicing fees with respect to the outstanding Class S-1 shares and did not incur stockholder servicing fees with respect to the outstanding Class S and Class D shares.

The following table summarizes the upfront selling commissions for each class of shares payable at the time of subscription and the stockholder servicing fee we pay the Dealer Manager on an annualized basis as a percentage of the NAV for such class:


	Class S Shares	Class S-1 Shares	Class D Shares	Class I Shares	Class E Shares	Class F Shares
Maximum Upfront Selling Commissions (% of Transaction Price)	up to 3.5%	up to 3.5%	up to 1.5%	—	—	—
Stockholder Servicing Fee (% of NAV)	0.85%	0.85%	0.25%	—	—	—

We will cease paying the stockholder servicing fee with respect to any Class S share or Class D share held in a stockholder’s account at the end of the month in which the Dealer Manager, in conjunction with the transfer agent, determines that total upfront selling commissions and stockholder servicing fees paid with respect to the shares held by the stockholder would exceed, in the aggregate, 8.75% of the gross proceeds from the sale of such shares (including the gross proceeds of any shares issued under our distribution reinvestment plan upon the reinvestment of distributions paid with respect thereto or with respect to any shares issued under our distribution reinvestment plan directly or indirectly attributable to such shares). At the end of such month, such Class S share or Class D share will convert into a number of Class I shares (including any fractional shares), with an equivalent aggregate NAV as such share. Such servicing fee limit does not apply to the Class S-1 shares.

Management Fee and Performance Fee

We will pay the Adviser a management fee equal to 1.0% per annum of NAV, calculated monthly before giving effect to any accruals for the management fee, stockholder servicing fees, performance fees or any distributions with respect to our Class S shares, Class S-1 shares, Class D shares and Class I shares. We will also pay the Adviser a Performance Fee equal to 10% of our “Performance Fee Income” with respect to our Class S shares, Class S-1 shares, Class D shares and Class I shares. Performance Fee Income with respect to each class of common shares subject to a performance fee means the net income (determined in accordance with U.S. GAAP) allocable to such class of common shares subject to adjustment as defined under the terms of our advisory agreement. During the period that the Adviser is advancing our organizational, offering and operating expenses, net income for purposes of the performance fee calculation will exclude these advanced expenses for the period incurred under US GAAP. After the period that the Adviser is advancing our organizational, offering and operating expenses, net income for purposes of the performance fee calculation will include previously advanced expenses that are to be repaid to the Adviser during the period. We will not pay the Adviser a performance fee with respect to any class of shares that has a negative total return per share for the calendar year. For purposes of the performance fee calculation, total return per share is defined as an amount equal to: (i) the cumulative distributions per share accrued with respect to such class of common shares since the beginning of the calendar year plus (ii) the change in NAV per share of such class of common shares since the beginning of the calendar year, prior to giving effect to (y) any accrual for performance fees with respect to such class of common shares or (z) any applicable stockholder servicing fees. We will not pay the Adviser a management or performance fee with respect to our Class E shares.

The management fee and the performance fee are payable in cash or Class E shares at the option of the Adviser.

We will not pay the Adviser a management fee with respect to our Class F shares. We will pay the Adviser a performance fee with respect to the Class F shares. The Class F performance fee payable with respect to each calendar year will be an amount equal to 10% of the excess of Performance Fee Income allocable to Class F Shares over a 6% annualized return on the Class F NAV per share. No performance fee is payable if the Performance Fee Income allocable to Class F is below the annualized 6% return in any calendar year or for a rolling two-year period.

Management fees and performance fees began to accrue on March 1, 2024. Management fees will be accrued monthly and paid quarterly in arrears and performance fees will be paid annually. For the three months ended March 31, 2024, we accrued management fees and performance fees of $145,000 and $205,000, respectively.

The initial term of our advisory agreement expires on March 31, 2025. The advisory agreement is subject to automatic renewals for successive one-year periods unless otherwise terminated in accordance with the provisions of the agreement. If the advisory agreement is terminated, the Adviser will be entitled to receive its prorated management fee and performance fee owed through the date of termination. If we elect not to renew our advisory agreement based on unsatisfactory performance and not for cause, we owe our Adviser a termination fee equal to three times the sum of our average annual management fee during the 24-month period before termination, calculated as of the end of the most recently completed fiscal quarter.

Our Adviser is subject to the supervision and oversight of our Board and has only such functions and authority as we delegate to it. The Adviser and its affiliates provide us with our management team, including our officers and appropriate support personnel. Each of our officers is an employee of the Adviser or one of its affiliates. We do not have any employees. We incurred $232,000 of costs for support personnel provided by the Adviser for the three months ended March 31, 2024 that are recorded as a component of due to affiliates on our consolidated balance sheets. We did not incur any costs for support personnel provided by the Adviser for the three months ended March 31, 2023.

Related Party Share Ownership

The table below summarizes the number of shares and the total purchase price of the shares that have been purchased by affiliates as of March 31, 2024.


$ in thousands, except share amounts	Class S Shares	Class S-1 Shares	Class D Shares	Class I Shares	Class E Shares	Total Purchase Price
Invesco Realty, Inc.(1)	1,052,487	—	1,052,487	1,052,487	1,052,464	$	105,340
Members of our board of directors (2)	—	—	—	—	11,018	278
Total	1,052,487	—	1,052,487	1,052,487	1,063,482	$	105,618

(1) Shares issued to Invesco Realty, Inc. are governed by the terms of the Invesco Subscription Agreement and classified as redeemable common shares on our condensed consolidated balance sheets. See Note 6 - “Redeemable Common Stock - Related Party” for further information.

(2) Represents shares issued to members of our board of directors, including stock awards under our Share-Based Compensation Plan.

11.Commitments and Contingencies

Commitments and contingencies may arise in the ordinary course of business. As of March 31, 2024, we had unfunded commitments of $131.1 million for ten of our commercial real estate loan investments. The unfunded commitments consist of funding for leasing costs, interest reserves and capital expenditures. Funding depends on timing of lease-up, renovation and capital improvements as well as satisfaction of certain cash flow tests. Therefore, the exact timing and amounts of such future loan fundings are uncertain. We expect to fund our loan commitments over the weighted average remaining term of the related loans of 2.61 years.

We have also committed to pay counterparty legal, diligence and other fees in connection with new financing facilities in the ordinary course of business.

From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of March 31, 2024, the Company was not involved in any material legal proceedings.

12.Subsequent Events

Investment Portfolio Activity

Subsequent to March 31, 2024, we originated two commercial real estate loans with an aggregate outstanding principal amount of $99.7 million and a total loan amount of $216.1 million. The loans earn interest at one-month term SOFR plus a spread for a weighted average interest rate of 8.35% based on the interest rate in effect at origination.

Financing Activity

Subsequent to March 31, 2024, we entered into a repurchase agreement facility with Barclays Bank PLC. The repurchase agreement has a maximum facility size of $250.0 million and bears interest at a one-month term SOFR plus a spread.

Stockholders’ Equity

Subsequent to March 31, 2024, we issued the following stock:


$ in thousands except share amounts	Shares	Net Proceeds



Common Stock:
Class S	—	$	—
Class S-1(1)(2)	785,812	19,079
Class D	—	—
Class I(3)(4)	216,749	5,112
Class E(5)(6)(7)	16,919	265
Class F(8)	4,747,348	120,000
Total	5,766,828	$	144,456

(1)Includes 756,834 shares issued to retail investors for net proceeds of $19.1 million.

(2)Includes 28,978 shares issued under our distribution reinvestment plan for a total value of $734,000, which is excluded from Net Proceeds.

(3)Includes 203,267 shares issued to retail investors for net proceeds of $5.1 million.

(4)Includes 13,482 shares issued under our distribution reinvestment plan for a total value of $341,000, which is excluded from Net Proceeds.

(5)Includes 10,507 shares issued to retail investors for net proceeds of $265,000.

(6)Includes 620 shares issued under our distribution reinvestment plan for a total value of $16,000, which is excluded from Net Proceeds.

(7)Includes 5,792 shares to our Advisor as payment for the management fee for total consideration of $145,000, which is excluded from Net Proceeds.

(8)Includes 4,747,348 shares issued to an institutional investor under the Class F Subscription Agreement for net proceeds of $120.0 million. See Note 7 - “Stockholders’ Equity”.

Share Repurchases

On April 30, 2024, we elected to repurchase 3,990,638 shares of our redeemable common stock from Invesco Realty, Inc. pursuant to the Invesco Subscription Agreement for an aggregate repurchase price of $100.0 million. The shares were not repurchased under the share repurchase plan. See Note 6 - “Redeemable Common Stock - Related Party”.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this quarterly report on Form 10-Q, or this “Quarterly Report,” we refer to Invesco Commercial Real Estate Finance Trust, Inc. and its consolidated subsidiaries as “we,” “us,” “the Company,” or “our,” unless we specifically state otherwise or the context indicates otherwise. We refer to our external manager, Invesco Advisers, Inc., as our “Adviser,” and we refer to the indirect parent company of our Adviser, Invesco Ltd. together with its consolidated subsidiaries (which does not include us), as “Invesco.”

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes to our unaudited condensed consolidated financial statements, which are included in Item 1 of this Quarterly Report, as well as the information contained in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”).

Forward Looking Statements

This Quarterly Report may include statements that constitute “forward-looking statements” within the meaning of the United States securities laws and the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include statements about possible or assumed future results of our business, investment strategies, financial condition, liquidity, results of operations, plans and objectives. When we use the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “project,” “forecast” or similar expressions and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” and any other statement that necessarily depends on future events, we intend to identify forward-looking statements.

Forward-looking statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are difficult to predict and are generally beyond our control. Although we make such statements based on assumptions we believe to be reasonable, there can be no assurance that actual results will not differ materially from our expectations as a result of several factors, including, but not limited to the following: our limited operating history; conflicts of interest with our Adviser; our Adviser’s broad discretion; risks related to the origination or acquisition of whole loans; creditor risks with respect to our portfolio; our investments becoming distressed or illiquid; our ability to obtain leverage; increases to our leverage ratio above our target; use of repurchase agreements for our financing; no limitations on our amount of short-term corporate debt; and other factors described under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report and our Annual Report on Form 10-K filed with the SEC. Considering the significant uncertainties inherent in these forward-looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans, which we consider to be reasonable, will be achieved. We caution you not to rely unduly on any forward-looking statements and urge you to carefully consider the factors. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Executive Overview

Introduction

We are a Maryland corporation formed in October 2022. Our primary investment strategy is to originate, acquire, and manage a diversified portfolio of loans and debt-like preferred equity interests secured by, or unsecured but related to, commercial real estate. To a lesser extent, we may purchase non-distressed public or private debt securities and invest in private operating companies in the business of or related to commercial real estate credit through debt or equity investment. We commenced investing in commercial real estate loans in May 2023. Prior to investing, we were primarily engaged in organizational activities.

We are externally managed by Invesco Advisers, Inc. (the “Adviser”), a registered investment adviser and an indirect, wholly-owned subsidiary of Invesco Ltd., an independent global investment management firm. Our Adviser utilizes the personnel and global resources of Invesco Real Estate to provide investment management services to us. We intend to qualify to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with the taxable year ended December 31, 2023. To maintain our REIT qualifications, we are generally required to distribute at least 90% of our REIT taxable income to our stockholders annually. We operate our business in a manner that permits our exclusion from the definition of an “Investment Company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

We are engaging in a continuous, unlimited private offering of our common stock to “accredited investors” (as defined by Rule 501 promulgated pursuant to the Securities Act) (the “Continuous Offering”) under exemptions provided by Section 4(a)(2) of the Securities Act and applicable state securities laws.

Factors Impacting Our Operating Results

Our operating results can be affected by a number of factors and depend on loan origination activity, interest earned on the commercial loan investments held in the portfolio, interest paid on the borrowing facilities of the portfolio and changes in the fair market value of our commercial real estate loan investments and our borrowings. Our net interest income varies primarily as a result of the number of loan originations in the period, the timing of entering into new borrowing arrangements and changes in benchmark interest rates and market spreads. Market spreads vary according to the type of investment or borrowing, conditions in the financial markets, competition and other factors, none of which can be predicted with any certainty.

We have elected the fair value option for our commercial real estate loan investments and our borrowing facilities. The fair market value of our commercial real estate loans can be impacted by changes in credit spread premiums (yield advantage over a benchmark rate) and the supply of, and demand for, assets in which we invest.

Market Conditions

During the first quarter of 2024, the Company originated four commercial real estate loans with an aggregate total loan commitment amount of $283.1 million and a spot coupon of 12.35% based on weighted average interest rate of SOFR + 7.03% on our net committed equity position as of March 31, 2024. The weighted average interest rate spread on our net committed equity position is comprised of the difference between the spread on our commercial real estate loans applied to the committed loan amounts less the spread on our borrowings applied to the total financing. This difference is divided by our net committed equity position. The weighted average interest rate is this spread combined with the Term SOFR benchmark rate in effect at March 31, 2024, after considering any impact of the interest floor.

Credit spreads on both whole loan originations and senior financing tightened in the first quarter, with the Company benefiting from tighter spreads on its senior financing facilities.

Real estate capital market sentiment fluctuated during the first quarter as expectations of near-term rate cuts tempered following the most recent CPI index reports. As the Federal Reserve kept their benchmark rate unchanged at 5.25%-5.50%, there are signs suggesting that real estate sellers have accepted the lower real estate valuations in their portfolios as the bid-ask spread narrowed. The Company has benefited from continued interest rate elevation as borrowers seek financing for new acquisitions or upcoming loan maturities in a market where alternative lenders are still attractive given the continued retrenchment of the banks.

Outlook

We believe the current capital market dislocation has created an opportunity to originate attractive loans with credit/structuring profiles at a premium to historical pricing. We expect relatively low transaction volume to continue through 2024 due in part to the current relatively restrictive lending environment, which we expect to continue until the Federal Reserve begins cutting interest rates. We will continue to monitor interest rate uncertainty along with its resulting impact on real estate capital markets.

As noted, we have seen a tightening of credit spreads that we expect to continue due to increased competition among debt funds as well as a decrease in cost of capital from senior financing facilities such as warehouse and repo lines. The tightening of spreads may result in impacts to valuations to varying degrees as well as impact to resulting interest and spot coupon rates.

CMBS markets saw an increase in transaction activity in 2024 compared to Q4 2023 but activity remained muted year-over-year and banks are consistently selective in providing commercial real estate financing, with some regional banks recently seeking ancillary business and deposits alongside loan originations. We believe limited bank and CMBS activity should allow us to continue to access high quality loans with desirable credit metrics, and diversify our sponsor/borrower base to include additional institutional groups. This limited activity may also result in reduced liquidity for sponsors/borrowers when they reach loan maturities in the next few years. We will continue to monitor bank and CMBS activity throughout 2024 and the resulting liquidity impact it may have on sponsor/borrower loan payoffs in our portfolio.

Overall, we believe the Company is positioned well to continue to aggregate loan originations in sectors/markets with high conviction and build relationships with sponsors/borrowers with strong balance sheets and stable track records. We believe that our “credit over yield” investment philosophy will allow us to provide durable current income to stockholders while seeking to minimize risk during the current market environment.

Q1 2024 Highlights

Capital Activity and Distributions

•Declared monthly net distributions totaling $6.3 million for the three months ended March 31, 2024.

•Raised $31.2 million of net proceeds from the sale of our common stock through our Continuous Offering during the three months ended March 31, 2024.

Investments

•Originated a floating rate senior commercial real estate loan with a total commitment amount of $61.5 million and outstanding principal amount of $61.0 million as of March 31, 2024. The underlying property is a multifamily property located within the Houston metropolitan statistical area.

•Originated a floating rate senior commercial real estate loan with a total commitment amount of $120.0 million and outstanding principal amount of $47.7 million as of March 31, 2024. The underlying property is a multifamily property located within the New York metropolitan statistical area.

•Originated a floating rate senior commercial real estate loan with a total commitment amount of $56.6 million and outstanding principal amount of $54.3 million as of March 31, 2024. The underlying property is a multifamily property located within the Los Angeles metropolitan statistical area.

•Originated a floating rate senior commercial real estate loan with a total commitment amount of $45.0 million and outstanding principal amount of $41.5 million as of March 31, 2024. The underlying property is a multifamily property located within the Los Angeles metropolitan statistical area.

Financing Activity

•Received net borrowings of $4.0 million from our revolving credit facility during the three months ended March 31, 2024.

•Received net borrowings of $151.4 million from our repurchase agreements during the three months ended March 31, 2024.

Financial Condition

Investment Activities

We commenced investing in commercial real estate loans in May 2023. As of March 31, 2024, we originated 14 commercial real estate loans with a fair value of $824.3 million. We elected the fair value option for our commercial real estate loan investments and, accordingly, we recognize any origination costs or fees associated with the loans in the period of origination. Our loan investments earn interest at term SOFR plus a spread and had a weighted average interest rate of 8.46% as of March 31, 2024.

The following table details overall statistics for our loan portfolio as of March 31, 2024:


$ in thousands	Balance Sheet Portfolio
Number of investments	14
Principal balance	$	823,415
Fair value	$	824,333
Unfunded loan commitments(1)	$	131,091
Weighted-average interest rate(2)	8.46		%
Weighted-average maximum maturity (years)(3)	4.56
Origination loan to value (LTV)(4)	65		%

(1) Unfunded commitments will primarily be funded to finance construction or development of real estate-related assets, capital improvements of existing assets, or lease-related expenditures. These future commitments will generally be funded over the term of each loan, subject in certain cases to an expiration date.

(2) Represents weighted average interest rate of the most recent interest period in effect for each loan as of period end. Loans earn interest at the one-month Term SOFR plus a spread.

(3) Assumes all extension options are exercised by the borrower; however, loans may be repaid prior to such date. Extension options are subject to certain conditions as defined in the respective loan agreement.

(4) Based on the independent property appraisals at the time of origination.

The following charts illustrate the diversification and composition of our loan portfolio based on fair value as of March 31, 2024:

Loan originations activity during the three months ended March 31, 2024 totaled $204.4 million as a result of four new loan originations. Additionally, loan fundings activity during the three months ended March 31, 2024 totaled $5.5 million for additional commitments made under existing loans. In the three months ended March 31, 2024, we earned $15.1 million of interest income on our loan portfolio (March 31, 2023: None).

The following table details our loan activity:


	Three Months Ended
$ in thousands	March 31, 2024		December 31, 2023
Loan originations	$	204,439	$	229,493
Loan fundings	5,473		5,040
Loan repayments and sales	—		—
Total net fundings	$	209,912	$	234,533

The following table provides details of our loan portfolio, on a loan-by-loan basis, as of March 31, 2024:


$ in thousands
Metropolitan Statistical Area	Property Type	Origination Date	Weighted Average Interest Rate(1)	Loan Amount(2)		Principal Balance Outstanding		Fair Value		Current Maturity	Maximum Maturity(3)
Phoenix	Industrial	05/17/2023	8.68%	$	136,000	$	123,045	$	123,094	6/9/2025	6/9/2028
San Jose(4)	Multifamily	05/31/2023	8.48%	41,700		41,700		41,737		6/9/2026	6/9/2028
New York(5)	Multifamily	07/26/2023	8.43%	73,600		73,600		73,690		8/9/2026	8/9/2028
Los Angeles	Multifamily	08/04/2023	8.43%	85,180		80,687		80,784		8/9/2025	8/9/2028
Miami	Industrial	08/25/2023	8.68%	42,676		35,605		35,636		9/9/2025	9/9/2028
Richmond	Industrial	09/25/2023	8.68%	38,300		32,696		32,730		10/9/2025	10/9/2028
Atlanta	Industrial	11/06/2023	8.68%	92,950		80,566		80,664		11/9/2025	11/9/2028
Dallas	Multifamily	12/07/2023	8.13%	70,000		60,077		60,219		12/9/2026	12/9/2028
Seattle	Multifamily	12/12/2023	8.28%	68,500		68,500		68,606		12/9/2026	12/9/2028
New York(6)	Multifamily	12/21/2023	8.33%	22,500		22,500		22,531		12/9/2026	12/9/2028
Houston	Multifamily	01/24/2024	8.33%	61,500		61,000		61,114		2/9/2027	2/9/2029
New York	Multifamily	02/08/2024	8.33%	120,000		47,651		47,740		2/9/2027	2/9/2029
Los Angeles	Multifamily	03/05/2024	8.48%	56,600		54,253		54,253		3/9/2027	3/9/2029
Los Angeles	Multifamily	03/28/2024	8.33%	45,000		41,535		41,535		4/9/2026	4/9/2029
			8.46%	$	954,506	$	823,415	$	824,333

(1)Represents weighted average interest rate of the most recent interest period in effect for each loan as of period end. Loans earn interest at the one-month Term SOFR plus a spread.

(2)Loan amount consists of outstanding principal balance plus unfunded loan commitments.

(3)Maximum maturity assumes all extension options are exercised by the borrower; however, loans may be repaid prior to such date. Extension options are subject to certain conditions as defined in the respective loan agreement.

(4)An affiliate of the Adviser previously originated a loan to an unaffiliated borrower in August 2018 secured by the same collateral as this loan. We negotiated the terms of our loan directly with the unaffiliated borrower at market and without the involvement of the affiliate of the Adviser. The unaffiliated borrower used the refinancing proceeds from our loan to repay the loan of the affiliate of the Adviser.

(5)The total whole loan is $73.6 million, including (i) a senior mortgage loan of $55.2 million, and (ii) a mezzanine note of $18.4 million.

(6)The total whole loan is $22.5 million, including (i) a senior mortgage loan of $18.0 million and (ii) a mezzanine note of $4.5 million.

Loan Risk Ratings

We evaluate each loan at origination and assign an overall risk rating based on several factors, including but not limited to, credit metrics and volatility, sponsorship, sector type, property condition and performance, and market to determine the overall health of each loan investment in the portfolio (“Loan Risk Rating”). Loans are rated “1” (very low risk), “2” (low risk), “3” (medium risk), “4” (high risk/potential for loss), or “5” (impaired/loss likely). We re-evaluate the loan risk ratings on our loan portfolio quarterly and update risk ratings as needed.

Our loan portfolio had a weighted-average loan risk rating of 2.7 as of March 31, 2024 and as of December 31, 2023.

Financing and Other Liabilities

We utilize a revolving line of credit as a short-term cash management tool to pay fees and expenses, finance investment activity and bridge portfolio-level financing arrangements.

Our revolving line of credit bears interest at a one-month term SOFR plus a spread and had a weighted average borrowing rate of 8.26% as of March 31, 2024.

We finance the majority of our commercial real estate loan portfolio through repurchase agreements. We have three repurchase agreement facilities that bear interest at one-month term SOFR plus a spread. These facilities had a weighted average borrowing rate of 7.54% as of March 31, 2024.

The below table summarizes our repurchase agreement and revolving line of credit borrowings as of March 31, 2024.


$ in thousands	Weighted Average Interest rate(1)	Maturity Date	Maximum Facility Size		Amount Outstanding		Available Balance
Repurchase Agreements:
Morgan Stanley Bank N.A.(2)	7.64%	05/25/2025	$	500,000	$	282,023	$	217,977
Citibank N.A.(3)	7.60%	6/1/2025 (original); 6/1/2027 (fully extended)	200,000		61,464		138,536
Bank of Montreal(4)	7.41%	7/18/2025 (original); 7/14/2028 (fully extended)	279,424		265,771		13,653
Total Repurchase Agreements	7.54%		979,424		609,258		370,166
Revolving Credit Facility(5)	8.26%		100,000		18,000		82,000
Total	7.56%		$	1,079,424	$	627,258	$	452,166

(2) Borrowing facility has an extension option of one year, subject to lender approval and compliance with certain financial and administrative covenants.

(4) Borrowing facility has three extension options of one year, subject to lender approval and compliance with certain financial and administrative covenants.

(5) The final maturity date of the Revolving Credit Facility is aligned with the Company’s ability to call remaining outstanding capital under certain subscription agreements.

Each of our repurchase agreements contains customary terms and conditions, including but not limited to, negative covenants relating to restrictions on our operations with respect to our status as a REIT, and financial covenants, such as a minimum interest coverage ratio covenant, minimum tangible net worth covenant, cash liquidity covenant and maximum leverage ratio covenant.

With respect to our revolving credit facility, we are required to comply with customary loan covenants and event of default provisions that include, but are not limited to, negative covenants relating to restrictions on operations with respect to our status as a REIT, and financial covenants. Such financial covenants include a minimum aggregate net capital contributions to net costs of investments ratio covenant and a maximum leverage ratio covenant.

As of March 31, 2024, we were in compliance with the covenants of our financing facilities.

Results of Operations

We commenced investing in commercial real estate loans in May 2023. Accordingly, our results of operations for the three months ended March 31, 2024 and 2023 are not comparable. We expect revenues and expenses to increase during the year ending December 31, 2024 because we will have a full year of operations in 2024 and expect to continue making additional investments.

For the three months ended March 31, 2024 and 2023, our results of operations consisted of:


	Three Months Ended March 31,

$ in thousands except per share amount	2024		2023
Net Interest Income
Commercial real estate loan interest income	$	15,140	$	—
Other interest income	241		—
Interest expense	(10,406)		—
Net interest income	4,975		—

Other Income (Expense)
Unrealized gain (loss) on commercial real estate loan investments, net	918		—
Unrealized gain (loss) on repurchase agreements, net	(723)		—
Commitment fee income, net of related party expense of $1,398 and $0, respectively	1,398		—
Other income	101		—
Total other income (expense), net	1,694		—

Expenses
Management and performance fees - related party	350		—
Debt issuance costs related to borrowings, at fair value	469		652
Organizational costs	5		450
General and administrative	1,158		25
Total expenses	1,982		1,127

Net income (loss)	$	4,687	$	(1,127)
Dividends to preferred stockholders	(7)		—
Net income (loss) attributable to common stockholders	$	4,680	$	(1,127)

Earnings (loss) per share:
Net income (loss) attributable to common stockholders
Basic	$	0.65	$	—
Diluted	$	0.65	$	—
Weighted average number of shares of common stock
Basic	7,183,194		—
Diluted	7,183,777		—

Net Income (Loss) attributable to Common Stockholders

For the three months ended March 31, 2024, our net income attributable to common stockholders was $4.7 million, or $0.65 basic and diluted net income per weighted-average share available to common stockholders. We reported net income for the three months ended March 31, 2024 primarily because we earned $5.0 million of net interest income and $1.4 million of commitment fee income, net of related party expenses, on $204.4 million of commercial real estate loan originations in the period before expenses of $2.0 million.

For the three months ended March 31, 2023, we reported a net loss of $1.1 million. Our net loss consisted of $652,000 of debt issuance costs, $450,000 of organizational costs and $25,000 of general and administrative expenses. We did not issue any equity in the three months ended March 31, 2023, and accordingly, did not report basic or diluted earnings per share.

Net Interest Income

Interest Income and Average Earning Asset Yields

The table below presents information related to our average earning assets and earning asset yields for the three months ended March 31, 2024.


$ in thousands	Three Months Ended March 31, 2024
Average earning assets(1)	$	740,952
Average earning assets yield(2)	8.17		%

(1) Average earning assets are based on weighted month-end balances.

(2) Average earning asset yield is calculated by dividing interest income by average earning assets. All yields are annualized.

Interest Expense and Cost of Funds

The table below presents information related our borrowings and cost of funds for the three months ended March 31, 2024.


$ in thousands	Three Months Ended March 31, 2024
Average borrowings(1)	$	569,169
Maximum borrowings (2)	$	627,258
Average cost of funds(3)	7.31		%

(1) Average borrowings are based on weighted month-end balances.

(2) Amount represents the maximum borrowings at each month-end within the period.

(3) Average cost of funds is calculated by dividing annualized interest expense by average borrowings.

Our interest expense for the three months ended March 31, 2024 is summarized below.


$ in thousands	Three Months Ended March 31, 2024
Repurchase agreement interest expense	$	10,134
Revolving credit agreement interest expense	272
Total interest expense	$	10,406

Other Income (Expense), Net

We generally seek to charge each borrower a commitment fee that is calculated as a percent of the whole loan on a fully funded basis at the time of origination. We retain 50% of commitment fees that we earn on our loan investments and pay our Adviser 50% of commitment fees that we earn (not to exceed 0.5% of the loan amount). For the three months ended March 31, 2024, we earned approximately $101,000 of other income and $1.4 million of commitment fee income, after related party expenses, on our loan investments. We recognized commitment fees immediately in earnings because we elected the fair value option for our loan investments.

The valuation of our commercial real estate loans, financing facilities, and company-level credit facilities is performed by an independent valuation adviser. In the three months ended March 31, 2024, we did not observe material changes in the collateral risks in our portfolio, however we did observe changes in market pricing for similar loan types to those in our portfolio and recorded a net unrealized gain of $918,000 on our investments. We compared the features of our loans to the interest rates and terms required by lenders in the new loan origination market for similar loans, and the yield required by investors acquiring similar loans in the secondary market. We also compared current market and collateral conditions to those present at origination or acquisition. Additionally, we recorded a net unrealized loss of $723,000 on our repurchase agreements following a review of market interest rates, which reflect estimates for how lenders would price equivalent loans for the remaining terms, for similar borrowing agreements with comparable loan-to-value ratios and credit profiles.

Expenses

Our expenses for the three months ended March 31, 2024 totaled $2.0 million and primarily consist of debt issuance costs, management fees, performance fees and general and administrative expenses. For the three months ended March 31, 2023, our expenses totaled $1.1 million and primarily consisted of debt issuance costs and organizational costs.

We expense debt issuance costs as incurred because we elected the fair value option for our repurchase agreements and revolving line of credit facilities. When we incur debt issuance costs prior to a debt facility closing, we expense the costs as incurred if we intend to elect the fair value option to account for the debt facility and the closing is probable as of the balance sheet date. Our debt issuance costs for the three months ended March 31, 2024 and March 31, 2023 primarily consist of upfront lender fees and legal costs directly associated with entering into our debt facilities. For the three months ended March 31, 2024, average borrowings were $569.2 million. There were no outstanding borrowings as of March 31, 2023.

Management fees and performance fees began to accrue on March 1, 2024. The management fee that we pay the Adviser to source our investments and manage our operations is based on our NAV. The performance fee that we pay the Adviser is based on the annual total return of the fund, subject to a minimum return hurdle. Total return is determined based on total distributions plus the change in NAV.

Our general and administrative expenses for the three months ended March 31, 2024 primarily consisted of accounting, auditing, legal and other professional fees.

Our organizational costs for the three months ended March 31, 2023 primarily consisted of legal fees.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to pay dividends, fund investments, repay borrowings, and fund other general business needs. Our sources of funds for liquidity consist of the net proceeds from our continuous private offering, net cash provided by operating activities, proceeds and available borrowings from repurchase agreements and our revolving credit facility, loan repayments, uncalled capital commitments, and future issuances of equity and/or debt securities.

We currently believe that we have sufficient liquidity and capital resources available for the acquisition of additional investments, repayments on borrowings, the payment of cash dividends as required for continued qualification as a REIT, and to repurchase shares of our common stock under our share repurchase plan. Cash needs for items other than asset acquisitions are generally met from operations, and cash needs for loan originations and asset acquisitions are funded by our continuous private offering and debt financings. However, there may be a delay between the sale of our shares and our origination of loan assets or purchase of assets that could result in a delay in the benefits to our stockholders, if any, of returns generated from our investment operations.

We held cash and cash equivalents of $6.0 million and restricted cash of $14.0 million as of March 31, 2024. Our cash and cash equivalents change due to normal fluctuations in cash balances related to the timing of principal and interest payments and loan origination and funding activity. Our restricted cash changes based on the volume of new subscriptions for our shares.

The following table sets forth changes in cash and cash equivalents and restricted cash:


$ in thousands	Three Months Ended March 31, 2024		Three Months Ended March 31, 2023
Cash flows from operating activities	$	8,435	$	(1)
Cash flows from investing activities	(209,912)		—
Cash flows from financing activities	195,917		—
Net change in cash, cash equivalents and restricted cash	$	(5,560)	$	(1)

Our operating activities provided net cash of $8.4 million for the three months ended March 31, 2024 primarily from amounts advanced by our Adviser under our advisory agreement, including $469,000 of debt issuance costs.

Our investing activities used net cash of $209.9 million in the three months ended March 31, 2024 and consisted of originating four commercial real estate loan investments in the period.

Our financing activities provided net cash of $195.9 million in the three months ended March 31, 2024. During the three months ended March 31, 2024, we received net proceeds from our revolving credit facility and repurchase agreements of $4.0

million and $151.4 million, respectively, and net proceeds from the issuance of common stock of $31.2 million. We also received net proceeds of $14.0 million from retail investor subscriptions paid in advance. Additionally, we used cash of $4.5 million and $228,000 for the three months ended March 31, 2024 to pay dividends and debt issuance costs, respectively.

As of March 31, 2024, our total assets were approximately $847.9 million and consisted primarily of fourteen investments in commercial real estate loans totaling $824.3 million, restricted cash of $14.0 million and cash and cash equivalents of $6.0 million. We financed our commercial real estate loan investments with $609.3 million of repurchase agreement borrowings from three lenders and $18.0 million from our revolving credit agreement.

Our primary sources of liquidity include available borrowings under our repurchase agreements and revolving credit facility and cash and cash equivalents. Amounts available under these sources as of March 31, 2024 and December 31, 2023 are summarized in the following table:


$ in thousands	March 31, 2024		December 31, 2023
Cash and cash equivalents	$	5,960	$	1,975
Available borrowings under revolving credit agreements	82,000		86,000
Available borrowings under master repurchase agreements	370,166		226,283
	$	458,126	$	314,258

Our target leverage ratio after we have raised substantial offering proceeds and acquired a broad portfolio of commercial real estate loan investments is approximately 50% to 65% of the aggregate value of the underlying collateral of our commercial real estate loan investments. As used herein, “leverage ratio” is measured by dividing (x) the sum of the Company’s consolidated outstanding liabilities under its portfolio-level repurchase agreements and financing arrangements, by (y) the aggregate of the underlying collateral securing the loans in the Company’s portfolio that are not subordinated loans at the time such leverage is incurred. For purposes of determining the value of the underlying collateral of our commercial real estate loan portfolio, the value is calculated as of the date on which the loan is extended to the borrower.

We also may use Company-level credit facilities or other financing arrangements that are not secured by commercial real estate loans or other investments as short-term cash management tools to pay fees and expenses, finance investment activity, and bridge portfolio-level financing arrangements. There is no limit on the short-term indebtedness the Company may incur under Company-level credit facilities. Company-level credit facility loan balances outstanding for 12 months or longer will be factored into the leverage ratio above.

As of March 31, 2024, we have aggregate uncalled capital of $394.7 million committed under the Invesco Subscription Agreement and Class F Subscription Agreement. Invesco Realty, Inc., an affiliate of Invesco, has committed to purchase up to $300 million in shares. We may call $150 million in capital under the Invesco Subscription Agreement in one or more closings through March 23, 2028. We may call up to $150 million in additional capital if needed to avoid triggering any concentration limit imposed by a third party in connection with its distribution or placement of our shares. Invesco’s affiliate may not submit its shares for repurchase under our share repurchase plan until the earlier of March 23, 2028 and the date that our aggregate NAV is at least $1.5 billion. We can only accept a repurchase request from Invesco’s affiliate after all requests from unaffiliated stockholders have been fulfilled. We may elect to repurchase all or any portion of the shares acquired by Invesco’s affiliate at any time at a per share price equal to the most recently determined NAV per share for the applicable share class.

As of March 31, 2024, we have called $105.3 million of capital under the Invesco Subscription Agreement and may call an additional $44.7 million of the initial $150 million capital committed under the Invesco Subscription Agreement. Refer to Note 12 - “Subsequent Events” of our condensed consolidated financial statements included in Item 1 of this Report for activity under the Invesco Subscription Agreement subsequent to March 31, 2024.

An institutional investor has committed to purchase up to $200 million of our Class F shares under the Class F Subscription Agreement at one or more closings held prior to December 5, 2024. The Class F stockholder may not submit its shares for repurchase under our share repurchase plan until the earlier of (i) the date our NAV reaches $1.5 billion and (ii) March 23, 2028. However, the Class F stockholder is entitled to request that we repurchase its shares in the event that there is a key person event or a material strategy change as defined in the terms of the Class F subscription agreement.

As of March 31, 2024, we have not called capital under the Class F Subscription Agreement and may call the entire $200 million committed under the Class F Subscription Agreement. Refer to Note 12 - “Subsequent Events” of our condensed

consolidated financial statements included in Item 1 of this Report for activity under the Class F Subscription Agreement subsequent to March 31, 2024.

If we are unable to raise substantial funds in our Continuous Offering, we will make fewer investments resulting in less diversification in terms of the type, number, and size of investments we make. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reduce our net income, and limit our ability to make distributions.

The Adviser has agreed to advance all of our organizational costs and offering expenses (other than upfront selling commissions and ongoing stockholder servicing fees) incurred through May 31, 2024, as extended under the terms of our amended and restated advisory agreement dated April 24, 2024. In addition, the Adviser has agreed to advance our operating expenses, including debt issuance costs, incurred through May 31, 2024, as extended under the terms of our amended and restated advisory agreement dated April 24, 2024. We will reimburse the Adviser for all advanced organizational costs, offering expense and operating expenses ratably over the 52 months commencing December 1, 2024. We will reimburse the Adviser on a quarterly basis for organizational costs, offering expenses and operating expenses incurred subsequent to May 31, 2024. Management fees and performance fees began to accrue on March 1, 2024. Management fees will be paid quarterly in arrears and performance fees will be paid annually. Commitment fees are not advanced by the Adviser and are currently payable to the Adviser.

As of March 31, 2024, we owed the Adviser $12.2 million consisting of (i) $4.2 million for debt issuance costs, (ii) $713,000 for organizational costs, (iii) $1.3 million for offering costs, (iv) $4.1 million for general and administrative expenses, (v) $145,000 for management fees, (vi) $205,000 for performance fees and (vii) $1.5 million for commitment fees. As of March 31, 2024, we owed a registered broker-dealer affiliated with the Adviser $3.2 million for stockholder servicing fees.

Contractual Obligations and Commitments

Commitments and contingencies may arise in the ordinary course of business. As of March 31, 2024, we had unfunded commitments of $131.1 million for ten of our commercial real estate loan investments. Unfunded commitments generally consist of funding for leasing costs, interest reserves and capital expenditures. Funding depends on timing of lease-up, renovation and capital improvements as well as satisfaction of certain cash flow tests. Therefore, the exact timing and amounts of such future loan fundings are uncertain. We expect to fund our loan commitments over the remaining current maturity of the related loans of 2.61 years.

We have also committed to pay counterparty legal, diligence and other fees in connection with new financing facilities in the ordinary course of business.

Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies and estimates that are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Recent Accounting Standards

There have been no significant changes to the status of our adoption of the recently issued accounting pronouncement that is disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Net Asset Value (“NAV”)

We calculate our NAV each month in accordance with valuation guidelines approved by our board of directors. We calculate our NAV for each class of shares based on the net asset values of our investments (including but not limited to commercial real estate loans and debt securities), the addition of any other assets (such as cash, restricted cash, receivables, and other assets obtained in the ordinary course of business), and the deduction of any liabilities (including but not limited to financing facilities, Company-level credit facilities, securitized loans, payables, and other liabilities incurred in the ordinary course of business). NAV is not a measure used under U.S. GAAP and the valuations of and certain adjustments made to our assets and liabilities used in the determination of NAV differs from U.S. GAAP. NAV is not equivalent to stockholders’ equity or any other U.S. GAAP measure.

The following table reconciles U.S. GAAP stockholders’ equity per our condensed consolidated balance sheets to our NAV:


$ in thousands	March 31, 2024
Stockholders' equity	$	77,602
Adjustments:
Redeemable common stock - related party(1)	105,340
Organizational costs advanced by Adviser(2)	713
Offering costs advanced by Adviser(3)	1,198
Operating expenses advanced by Adviser(4)	8,207
Accrued stockholder servicing fees not currently payable(5)	3,114
Preferred stock liquidation preference	(228)
NAV	$	195,946

(1) We classify common stock held by an Invesco affiliate as redeemable common stock and include the value of these shares as a component of our NAV. We report our redeemable common stock on our condensed consolidated balance sheets at redemption value. Redemption value is determined based on our net asset value (“NAV”) per share as of our balance sheet date.

(2) The Adviser advanced all of our organizational costs through March 31, 2024. We expense our organizational costs as incurred in our condensed consolidated statements of operations. We will reimburse the Adviser for all of our organizational costs advanced through May 31, 2024 ratably over the 52 months commencing December 1, 2024. We will reimburse the Adviser for any organizational costs incurred subsequent to May 31, 2024 as incurred. For purposes of calculating our NAV, organizational costs paid by the Adviser through May 31, 2024 will not be recognized as an expense until we reimburse the Adviser for these costs.

(3) The Adviser advanced all of our offering costs through March 31, 2024. We recorded $1,198,000 of our offering costs as a reduction of additional paid-in capital and deferred $83,000 of offering costs as an other asset in our condensed consolidated balance sheets as of March 31, 2024. Our deferred offering costs will be recorded as a reduction of additional paid-in capital when we issue Class F stock. We will reimburse the Adviser for all of our offering costs incurred through May 31, 2024 ratably over 52 months commencing December 1, 2024. For purposes of calculating our NAV, offering costs paid by the Adviser through May 31, 2024 will not be recognized as a reduction in NAV until we reimburse the Adviser for these costs.

(4) The Adviser advanced all of our operating expenses, including $4.1 million for general and administrative expenses and $4.2 million for debt issuance costs, through March 31, 2024. These costs include $106,000 of certain prepaid expenses that are classified as other assets in our U.S. GAAP consolidated financial statements that have also been excluded from our NAV. We will reimburse the Adviser for all of our advanced operating expenses incurred through May 31, 2024 ratably over 52 months commencing December 1, 2024. We will reimburse the Adviser for any operating expenses incurred subsequent to May 31, 2024 as incurred. For purposes of calculating our NAV, operating expenses paid by the Adviser on our behalf through May 31, 2024 will not be reflected in our NAV until we reimburse the Adviser for these costs.

(5) We have entered into an agreement with the Dealer Manager in connection with the Continuous Offering. Under the terms of our agreement, the Dealer Manager is entitled to receive upfront selling commissions and stockholder servicing fees for Class S, Class S-1 and Class D shares sold in the Continuous Offering. As of March 31, 2024, we have accrued stockholder servicing fees totaling $3,160,000 of which $46,000 is currently payable to the Dealer Manager.

The following table details the major components of our NAV as of March 31, 2024:



$ in thousands, except share data	March 31, 2024
Commercial real estate loan investments, at fair value	$	824,333
Cash and cash equivalents	5,960
Restricted cash	14,021
Interest receivable	3,191
Due from affiliate	228
Repurchase agreements, at fair value	(609,981)
Revolving credit facility, at fair value	(18,000)
Interest payable	(2,207)

Dividends and distributions payable	(4,197)
Accounts payable, accrued expenses and other liabilities	(15,268)
Due to affiliates(1)	(1,906)
Preferred stock liquidation preference	(228)
Net asset value	$	195,946
Number of outstanding shares(2)	7,822,934

(1) Excludes (i) amounts advanced by the Adviser of $713,000 for organizational costs, $1.3 million for offering costs, $4.2 million for debt issuance costs and $4.1 million for general and administrative expenses and (ii) accrued stockholder servicing fees not currently payable to the Dealer Manager of $3.1 million.

(2) Includes 4,209,925 shares of common stock held by an Invesco affiliate that are classified as redeemable common stock.

The following table provides a breakdown of our total NAV and NAV per share by class as of March 31, 2024:


$ in thousands, except per share data	Class S Shares		Class S-1 Shares		Class D Shares		Class I Shares		Class E Shares		Total
Net asset value	$	26,370	$	63,672	$	26,370	$	51,259	$	28,275	$	195,946
Number of outstanding shares(1)	1,052,598		2,543,345		1,052,598		2,047,972		1,126,421		7,822,934
NAV Per Share	$	25.05	$	25.03	$	25.05	$	25.03	$	25.10

(1) Includes 1,052,487 Class S shares, 1,052,487 Class D shares, 1,052,487 Class I shares and 1,052,464 Class E shares held by an Invesco affiliate that are classified as redeemable common stock.

Funds from Operations, Adjusted Funds from Operations and Funds Available for Distribution

Funds from operations (“FFO”), adjusted funds from operations (“AFFO”) and funds available for distribution (“FAD”), as defined below, are not measures used under U.S. GAAP and certain adjustments made to our U.S. GAAP net income (loss) used in the determination of FFO, AFFO and FAD will differ from U.S. GAAP. FFO, AFFO, and FAD should not be considered to be more relevant or accurate than the U.S. GAAP methodology in calculating net income (loss) or in evaluating our operating performance. FFO, AFFO, and FAD should not be considered as alternatives to net income (loss) as indications of our performance or as alternatives to cash flows from operating activities as indications of our liquidity, but rather should be reviewed in conjunction with these and other U.S. GAAP measurements. Further, FFO, AFFO, and FAD are not intended to be used as liquidity measures indicative of cash flow available to fund our cash needs, including our ability to make distributions to our stockholders. In addition, our methodology for calculating AFFO and FAD may differ from methodologies employed by other companies to calculate the same or similar supplemental performance measures, and accordingly, our reported AFFO and FAD may not be comparable to the AFFO and FAD reported by other companies.

FFO is a standard REIT industry metric defined by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as net income or loss (computed in accordance with U.S. GAAP), excluding (i) gains or losses from sales of depreciable real property, (ii) impairment write-downs on depreciable real property, plus (iii) real estate-related depreciation and amortization and (iv) similar adjustments for non-controlling interests and unconsolidated entities.

AFFO further adjusts FFO to reflect the performance of our portfolio by adjusting for items we believe are not directly attributable to our operations. Our adjustments to FFO to arrive at AFFO include removing the impact of (i) organizational costs advanced by the Adviser, (ii) preferred stock offering costs, (iii) equity based compensation awards and amortization of unvested restricted stock awards, and (iv) unrealized (gains) losses from changes in the fair value of financial instruments. Organizational costs advanced by the Adviser are removed to arrive at FFO as these costs are reflective of the costs incurred to stand up our operations and are not considered ongoing operating costs. Offering costs related to preferred stock issuances, similarly, were organizational in nature and are not considered reflective of ongoing operational costs. We may add additional adjustments from FFO to arrive at AFFO as appropriate; for example, repayment of organizational costs to the Adviser will reduce AFFO in the periods such payments are made.

Our business objective is to provide attractive risk-adjusted returns to our stockholders, primarily through dividends. We believe FAD is a meaningful non-GAAP measure that provides useful information for considering our operating results and certain other items relative to the amount of our distributions by removing the impact of certain non-cash items from our operating results. FAD is calculated as AFFO excluding (i) operating expenses advanced by the Adviser until the advanced expenses are reimbursed to the Adviser, (ii) stockholder servicing fees paid during the period, and (iii) management fees and performance fees paid in shares of our common stock even if repurchased by us. FAD is not indicative of cash available to fund our cash needs and does not represent cash flows from operating activities in accordance with U.S. GAAP. Cash flows from operating activities in accordance with U.S. GAAP would generally include adjustments for working capital items and actual cash receipts from interest income recognized on commercial real estate loan investments, which are excluded for FAD. Furthermore, FAD is adjusted for stockholder servicing fees, which are not considered when determining cash flows from operating activities in accordance with U.S. GAAP.

To maintain our qualification as a REIT, U.S. federal income tax law generally requires that we distribute at least 90% of our REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding net capital gains. We plan to distribute at least 100% of our REIT taxable income. Because we view funds available for distribution as a consistent measure of our investment portfolio's ability to generate income for distribution to common stockholders, funds available for distribution is one metric, but not the exclusive metric, that our Board uses to determine the amount, if any, and the payment date of dividends on our common stock. However, funds available for distribution should not be considered as an indication of our taxable income, a guaranty of our ability to pay dividends or as a proxy for the amount of dividends we may pay, as funds available for distribution excludes certain items that impact our cash needs.

The table below provides a reconciliation of U.S. GAAP net income (loss) attributable to common stockholders to FFO, AFFO, and FAD for the following periods:


$ in thousands	Three Months Ended March 31, 2024
Net income (loss) attributable to common stockholders	$	4,680
Funds from operations (FFO)	4,680
Adjustments:
Organizational costs advanced by Adviser(1)	5

Equity based compensation expense	17
Unrealized (gain) loss on commercial real estate loan investments, net	(918)
Unrealized (gain) loss on repurchase agreements, net	723
Adjusted funds from operations (AFFO)	4,507
Adjustments:
Operating expenses advanced by Adviser(2)	1,560
Non-cash management fee	145
Non-cash performance fee	205
Stockholder servicing fees paid to the Dealer Manager	(86)
Funds available for distribution (FAD)	$	6,331

(1) Represents organizational costs as reported on our condensed consolidated statements of operations

(2) Operating expenses advanced by the Adviser consist of:


$ in thousands	Three Months Ended March 31, 2024
Debt issuance costs related to borrowings, at fair value	$	469
General and administrative expenses	1,158
Less: equity based compensation expense	(17)
Less: expenses not advanced by the Adviser	(50)
Total operating expenses advanced by the Adviser	$	1,560

The components of funds available for distribution for the three months ended March 31, 2024 are:


$ in thousands	Three Months Ended March 31, 2024
Net interest income	$	4,975
Commitment fee income, net of related party expense	1,398
Other income	101

Stockholder servicing fees paid to the Dealer Manager	(86)
Expenses not advanced by the Adviser	(50)
Subtotal	6,338
Dividends to preferred stockholders	(7)
Funds available for distribution	$	6,331

Distributions

We generally intend to distribute substantially all of our taxable income, which does not necessarily equal net income as calculated in accordance with U.S. GAAP, to our stockholders each year to comply with the REIT provisions of the Internal Revenue Code of 1986 (the “Code”) and minimize tax liability.

We began declaring monthly distributions in August 2023 with a cumulative distribution from funds available for distribution up to that point. The net distribution varies for each class based on the applicable stockholder servicing fee, which is deducted from the monthly distribution per share and paid directly to the applicable distributor.

The table below details the net distribution per share for each of our common share classes for the three months ended March 31, 2024:


Declaration Date	Class S Shares		Class S-1 Shares		Class D Shares		Class I Shares		Class E Shares
January 31, 2024	$	0.1600	$	0.1419	$	0.1600	$	0.1600	$	0.1600
February 29, 2024	0.1600		0.1419		0.1600		0.1600		0.1600
March 31, 2024(1)	0.1600		0.1428		0.1600		0.1600		0.1600
March 31, 2024(1)	0.3800		0.3800		0.3800		0.3800		0.3800
Total	$	0.8600	$	0.8066	$	0.8600	$	0.8600	$	0.8600

(1) On March 31, 2024, we declared a monthly distribution of $0.1600 per share and a special distribution of $0.3800 per share for each share class.

The following table summarizes our distributions declared during the three months ended March 31, 2024.


	Three Months Ended
	March 31, 2024
$ in thousands		Amount		Percentage
Distributions
Payable in cash		$	4,779	76	%
Reinvested in shares		1,532		24	%
Total distributions		$	6,311	100	%
Sources of Distributions
Cash flows from operating activities(1)		$	6,311	100	%
Offering proceeds		—		—
Financing proceeds		—		—
Total sources of distribution		$	6,311	100	%

Net cash provided by operating activities		$	8,435

(1) As of March 31, 2024, our inception to date cash flows from operating activities funded 100% of our distributions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company may be exposed to market risk with respect to the fair value of commercial real estate loans and borrowings due to changes in market conditions, including spreads, benchmark interest rates, property cash flows, and commercial property values that serve as collateral. While we do not seek to avoid risk completely, we believe that risk can be quantified from historical experience, and we seek to actively manage that risk, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake.

Interest Rate Risk

Interest rate risk is highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. We are exposed to interest rate volatility primarily as a result of the floating rate nature of the commercial real estate loans we hold and the financing we place on them. Additionally, we may use Company-level credit facilities featuring floating interest rates for liquidity and working capital purposes. Furthermore, we may make investments in fixed and floating rate debt securities; the value of our positions may increase or decrease depending on interest rate movements. Finally, interest rate changes may impact the availability of financing needed to expand our investment portfolio.

A rise in benchmark interest rates, such as SOFR, can be expected to lead to higher interest income earned (calculated as benchmark interest rate plus spread) on any variable rate commercial real estate loan we may hold and to declines in the value of any fixed rate commercial real estate loan we may hold. Rising benchmark interest rates carry default risk to our borrowers, because debt service payments may increase relative to cash flows from underlying properties, triggering borrower liquidity covenants. Therefore, we expect to protect interest income by requiring borrowers to purchase benchmark interest rate caps, which provides a hedge against rising benchmark interest rates, whereby the borrower will receive excess cash if benchmark interest rates exceed predetermined strike prices. Furthermore, rising benchmark interest rates also cause our overall cost of borrowing to increase, partially offsetting any increase in elevated interest income earned on our variable rate commercial real estate loan. We may use derivative financial instruments to hedge benchmark interest rate exposure on our borrowings to mitigate the impact on our debt service payments. An increase in benchmark interest rates may result in an increase in our net interest income and the amount of performance fees payable to the Adviser.

A decline in benchmark interest rates can be expected to lead to lower interest income earned from any variable rate commercial real estate loan we hold and increases in the value of any fixed rate commercial real estate loan we may hold. To mitigate the impact of reduced earnings as a result of declining benchmark interest rates, we expect to structure benchmark interest rate floors into each loan where the borrower will be required to pay minimum debt service payments should benchmark interest rates fall below a predetermined rate. Additionally, reduced benchmark interest rates also cause our overall cost of borrowings to decrease. Because our borrowings do not feature interest rate floors, but our variable rate commercial real estate loan feature minimum debt service payments due to us, declining benchmark interest rates below the structured floors may result in an increase to the net interest income received and an increase in the amount of performance fees payable to the Adviser.

As of March 31, 2024, we had $823.4 million of outstanding principal on our floating rate commercial real estate loans, $609.3 million outstanding on our floating rate financing facilities and $18.0 million outstanding on our Company-level credit facilities.

The net interest income sensitivity analysis table presented below shows the estimated impact over a twelve-month period of an instantaneous parallel shift in the yield curve, up and down by 100 basis points on our net interest income, assuming no changes in the composition of our commercial real estate loan investment portfolio and our outstanding borrowings in effect as of March 31, 2024. The analysis presented utilized assumptions, models and estimates of our Adviser based on our Adviser’s judgment and experience.


$ in thousands	At March 31, 2024
Change in Interest Rates	Projected Increase (Decrease) in Net Interest Income		Percentage Change in Projected Net Interest Income
+1.00%	$	1,962	9.03	%
-1.00%	$	(1,930)	(8.89)	%

Certain assumptions have been made in connection with the calculation of the information set forth in the foregoing interest rate sensitivity table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that

would affect the outcomes. The interest rate scenarios assume interest rates at March 31, 2024. Furthermore, while the analysis reflects the estimated impact of interest rate increases and decreases on a static portfolio, we actively manage the size and composition of our investments, which can result in material changes to our interest rate risk in the portfolio.

The information set forth in the interest rate sensitivity table above and all related disclosures constitutes forward-looking statements within the meaning of Section 21E of the Exchange Act. Actual results could differ significantly from those estimated in the foregoing interest rate sensitivity table.

Credit Risk

We are exposed to credit risk in our commercial real estate loans with respect to a borrower’s ability to make required debt service payments to us and repay the unpaid principal balance in accordance with the terms of the applicable loan agreement. We manage this risk by conducting a credit analysis prior to making an investment and by actively monitoring our portfolio and the underlying credit quality, including subordination and diversification, of our commercial real estate loans. In addition, we re-evaluate the credit risk inherent in our commercial real estate loans on a regular basis under fundamental considerations such as gross domestic product, unemployment, interest rates, retail sales, store closing/openings, corporate earnings, housing inventory, affordability and regional home price trends.

While our investment objectives include avoiding excess sponsor/borrower concentration, we expect to experience some level of sponsor/borrower concentration prior to the time that we have raised substantial offering proceeds and acquired a broad portfolio of Credit Assets (the “Ramp-Up Period”). At March 31, 2024, three of the commercial real estate loans aggregating $236.5 million and approximately 29% of our loan portfolio, at fair value, are cross collateralized and cross defaulted under a master credit agreement with a single borrower. We have committed to fund an additional $30.9 million under the master credit agreement for leasing costs, interest reserves and capital expenditures, and we may choose to add additional commercial real estate loans under the master credit agreement. The loans that the Company has made under the master credit agreement are guaranteed by an affiliate of the borrower that in turn indirectly owns the borrower.

We are exposed to credit risk with respect to the tenants that occupy properties that serve as collateral to our commercial real estate loans. To mitigate this risk, we seek to avoid large single tenant exposure and we undertake a credit evaluation of major tenants prior to making a loan. This analysis includes extensive due diligence of a potential tenant’s creditworthiness and business, as well as an assessment of the strategic importance of the property to the tenant’s core business operations.

Finally, we may be exposed to counterparty credit risk under the terms of a derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties.

Market Risk

Market Value Risk

We may also be exposed to market risk with respect to the fair value of our commercial real estate loans, debt securities and borrowings due to changes in market conditions, including spreads, benchmark interest rates, property cash flows, and commercial property values that serve as collateral. We seek to manage our exposure to market risk by originating or acquiring commercial real estate loans secured by different property types located in diverse, but liquid markets with stable credit ratings. The fair value of our commercial real estate loans, debt securities and borrowings may fluctuate, therefore the amount we will realize upon any repayment, sale, or an alternative liquidation event is unknown.

The investment portfolio value sensitivity analysis table presented below shows the estimated impact of a change in market benchmark spreads, up and down 100 basis points, on the fair value of our benchmark spread-sensitive investments and borrowings as of March 31, 2024, assuming a static portfolio and constant financing. When evaluating the impact of changes in benchmark spreads, prepayment assumptions and principal reinvestment rates are adjusted based on our Adviser’s expectations. The analysis presented utilized assumptions, models and estimates of our Adviser based on our Adviser’s judgment and experience.


$ in thousands	At March 31, 2024
Change in Benchmark Spreads	Projected Increase (Decrease) in Net Portfolio Value		Percentage Change in Projected Net Portfolio Value
+1.00%	$	(3,482)	(1.77)	%
-1.00%	$	1,671	0.85	%

Certain assumptions have been made in connection with the calculation of the information set forth in the foregoing benchmark spread sensitivity table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes. Furthermore, while the analysis reflects the estimated impact of benchmark spread increases and decreases on a static portfolio, we actively manage the size and composition of our investments, which can result in material changes to our benchmark spread risk in the portfolio.

The information set forth in the benchmark spread sensitivity table above and all related disclosures constitutes forward-looking statements within the meaning of Section 21E of the Exchange Act. Actual results could differ significantly from those estimated in the foregoing benchmark spread sensitivity table.

Real Estate Risk

Commercial property values are subject to volatility and may be adversely affected by a number of factors, including: national, regional and local economic conditions; local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes and/or tax and legal considerations. Changes in commercial property values are difficult to predict with accuracy. We model a range of valuation scenarios and the resulting impacts to our business.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report was made under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based upon this evaluation, our CEO and CFO have concluded that as of the end of the period covered by this Quarterly Report our disclosure controls and procedures (a) are effective to reasonably ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by SEC rules and forms and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of March 31, 2024, we were not involved in any such legal proceedings.

ITEM 1A. RISK FACTORS

There were no material changes during the period covered by this Quarterly Report to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 29, 2024. Additional risks not presently known, or that we currently deem immaterial, also may have a material adverse effect on our business, financial condition and results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Unregistered Sales of Equity Securities

On January 16, 2024, we issued 9,694 Class S-1 shares at a price per share of $25.2003 for a total value of $244,000, 3,193 Class I shares at a price per share of $25.2179 for a total value of $81,000, and 275 Class E shares at a price per share of $25.2274 for a total value of $7,000 under our distribution reinvestment plan.

On February 13, 2024, we issued 5,469 Class S-1 shares at a price per share of $25.0100 for a total value of $137,000, 1,892 Class I shares at a price per share of $25.0255 for a total value of $47,000, and 164 Class E shares at a price per share of $25.0482 for a total value of $4,000 under our distribution reinvestment plan.

On March 13, 2024, we issued 6,697 Class S-1 shares at a price per share of $25.2036 for a total value of $169,000, 3,160 Class I shares at a price per share of $25.1748 for a total value of $79,000, and 183 Class E shares at a price per share of $25.1693 for a total value of $5,000 under our distribution reinvestment plan.

The transactions described above were exempt from the registration provisions of the Securities Act by virtue of Section 4(a)(2) thereof.

Issuer Purchases of Equity Securities

During the three months ended March 31, 2024, we did not repurchase any shares of our common stock under our share repurchase plan or otherwise.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


Exhibit No.						Description

3.1						Articles of Amendment and Restatement of the Company, incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10, filed with the SEC on June 29, 2023.

3.2						Articles of Amendment of the Company, incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 10/A, filed with the SEC on August 25, 2023.

3.3						Articles Supplementary Classifying and Designating a Class of Preferred Stock as 12.5% Series A Cumulative Redeemable Preferred Stock and Fixing Distribution and Other Preferences and Rights of Such Class, incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 10, filed with the SEC on June 29, 2023.

3.4						Articles Supplementary Classifying and Designating a Class of Common Stock as Class S-1 Common Stock and Fixing Distribution and Other Preferences and Rights of Such Class, incorporated by reference to Exhibit 3.4 to the Company’s Registration Statement on Form 10/A, filed with the SEC on August 25, 2023.

3.5						Articles Supplementary filed with the State Department of Assessments and Taxation of Maryland effective on October 16, 2023, incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K, filed with the SEC on October 19, 2023.

3.6						Articles Supplementary Classifying and Designating a Class of Common Stock as Class F Common Stock and Fixing Distribution and Other Preferences and Rights of Such Class, incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K, filed with the SEC on December 11, 2023.

3.7						Bylaws of the Company, incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form 10, filed with the SEC on June 29, 2023.

4.1						Distribution Reinvestment Plan adopted by the Company, effective as of March 23, 2023, incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 10, filed with the SEC on June 29, 2023.

10.1						Amended and Restated Advisory Agreement, dated April 24, 2024, by and among Invesco Commercial Real Estate Finance Trust, Inc., Invesco Commercial Real Estate Finance Investments, LP. and Invesco Advisers, Inc., incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K, filed with the SEC on April 29, 2024.

31.1*						Certification of Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*						Certification of Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*						Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*						Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101						The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in iXBRL (inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Changes in Equity and Redeemable Equity Instruments; and (iv) Condensed Consolidated Statements of Cash Flows

104						Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed herewith

The agreements and other documents filed as exhibits to this Quarterly Report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


	INVESCO COMMERCIAL REAL ESTATE FINANCE TRUST, INC.
May 13, 2024	By:	/s/ Hubert J. Crouch
		Hubert J. Crouch
		Chief Executive Officer
		(Principal Executive Officer)

May 13, 2024	By:	/s/ R. Lee Phegley, Jr.
		R. Lee Phegley, Jr.
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)